Sunday, December 16, 2012

White House: Clinton Tax Rates on Rich Were Great! Spending? Not So Much.

    Throughout the tax policy debates in the presidential campaign and carrying over into the current fiscal cliff talks, the spending side of the equation has been a contentious issue.  One of the Obama administration's talking points has been that the expiration of the Bush Tax Cuts for the wealthy would simply return rates to the level they were in the Clinton administration when the economy was booming and deficits were falling.  Although it is unclear how higher taxes on the rich help the economy, the President was not shy about pressing this point during his campaign.  From July 2012:
By the way, these tax cuts for the wealthiest Americans are also the tax cuts that are least likely to promote growth.  So we can’t afford to keep that up, not right now.  So I’m not proposing anything radical here.  I just believe that anybody making over $250,000 a year should go back to the income tax rates we were paying under Bill Clinton -- back when our economy created nearly 23 million new jobs, the biggest budget surplus in history, and plenty of millionaires to boot. 
    So if the Clinton tax rates on the "wealthy" were good for the economy, how about the spending?  When Clinton took office, total federal government spending was about $2.1 trillion (all figures inflation adjusted per this chart at Heritage.org.)  In 2000, spending had only risen to $2.3 trillion, thanks in large part to the Republican Congress which swept into office in 1994.  Revenue during that same time went from $1.65 to almost $2.6 trillion.  It is arguable how much of that increase was due to the "Clinton tax rates" on the wealthy and how much was simply due to the booming economy.  But in 2010, while spending had risen to $3.6 trillion, revenues had fallen to $2.1 trillion.  Is this the kind of "balance" the president speaks of?  A reporter tried to get Jay Carney to address this at Friday's Press Briefing:
Q    You are comfortable, quite obviously, with the Clinton-era tax rates for the reasons you have said, economically and otherwise.  Are you similarly comfortable with the Clinton-era level of spending, even for an inflation adjustment as of ’10?
MR. CARNEY:  Well, I think you’d have to give me a little more specificity.  If you're making the point that under Bill Clinton deficits were reduced and turned into surpluses, we obviously find that a commendable record.
Q    Right.  But there was less discretionary spending.  There was less entitlement spending.  Things like that.
MR. CARNEY:  But again, what’s your question?
Q    Would that be a level of spending the President --
MR. CARNEY:  I think the level of spending from 20 years ago, no, I don't think that's --
Q    But with an inflation adjustment, just for example.
MR. CARNEY:  I’m not going to make policy from here based on top line numbers.  I think that the President has demonstrated -- let’s back up, too.  When we talk about this deal, remember back in the summer of 2011, after a grand bargain was not achieved, Republicans could not in the end go along with revenue being part of the package, the Budget Control Act was passed and signed into law, agreed to by the President as well as leaders in Congress and approved by significant percentages of each party in each house.
Speaker of the House Boehner at that time declared that he had gotten, on behalf of House Republicans, 98 percent of what he sought.  So let me remind you when we talk about what this President has been willing to do, that at the time when he signed into law $1.1 trillion in discretionary spending cuts, that was viewed by Speaker Boehner as a great victory for Republicans.  Additionally, that bill created a super committee and set up a system where an additional $1.2 trillion in deficit reduction needed to be achieved or else the sequester would kick in, and that’s why we face the fiscal cliff, or one half of it.
But it is important to know when we talk about who’s willing to move here, who’s willing to compromise, who’s willing to accept some of the other party’s goals, that when the President of the United States signed into law the Budget Control Act in the summer of 2011 and signed into law $1.1 trillion in cuts, Speaker Boehner said it was a 98-percent victory for Republicans.

    Frankly, Carney comes across initially as almost obtuse, first with "If you're making the point that under Bill Clinton deficits were reduced...," moving on to "But again, what’s your question?" and then finally, "I think the level of spending from 20 years ago, no, I don't think that - ."  The reporter then spelled out (again) what should have been obvious, that he was talking about spending with an "inflation adjustment."  By this time though, Carney had stalled long enough to collect his thoughts, and proceeded to use 269 words to not answer the question, ending with an abrupt "Alexis," signaling that he was moving on to the next question.

    Missing was the explanation of how the president could justify praising the higher tax rates of the Clinton era for the wealthy without also admiring a level of inflation adjusted spending that was 36% lower in 2000 than in 2010.  Also missing was an explanation of how a $1.3 trillion increase in spending over Clinton era spending could be made up with a tax increase on the "wealthy" that is not even projected to raise $1 trillion in 10 years.

    I am by no means exempting the Republicans from blame on increased spending.  The Bush administration was certainly a lost opportunity to cut spending.  But even with the Bush tax cuts, even with the economic hit taken by the country on 9/11, even with additional war spending, that same chart show how after 2004, deficits began to drop.  If the Bush administration had held the line on discretionary and entitlement spending (instead of pushing new entitlements like the Medicare prescription drug benefit,) surpluses would have become the norm.

    So after Carney shut down this reporter at the Press Briefing, will anyone broach the subject with Carney again, or perhaps even the president himself?  Or will the most fiscal unbalanced president in history continue to get a pass on his claim of a "balanced approach" to tax increases and spending cuts?  I fear the latter is more likely.

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